Low Income Countries

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Most countries in the low income category are in sub-Saharan Africa and South Asia, with a few from other developing regions. Many have relatively low levels of inequality, but also low income overall with living standards for much of the population barely above subsistence level. Efforts are needed in many areas to generate the productivity and growth necessary to underpin inclusive economies, including poverty alleviation and improved public services such as healthcare, education, and training.

Bangladesh ranks 36th out of 79 developing economies on the IDI. It has improved GDP per capita and reduced public debt over the last five years, but wealth inequality has increased substantially. The Framework indicates that one of Bangladesh’s strengths is better access to finance from banks and the equity market than most other countries at the same income level. However, business development is held back by red tape and rampant corruption, with many driven to do business in the large informal economy. Infrastructure and basic services are in dire need of improvement, as is the education system – enrollment rates at primary level are low, quality of education is poor, and lower-income students do particularly badly, thereby perpetuating inequality.

Cambodia ranks 43rd on the IDI, with hardly any change on aggregate over the last five years. The country benefits from high employment, though labor productivity remains low, despite some improvement over the last five years. The Framework shows that Cambodia tops its income group on intermediation of business investment, and its basic infrastructure and services are better than most of its peers. However, it spends less on education as a percentage of GDP than most peers, and indeed both enrollment rates and quality of education and vocational training need improvement. Cambodia would also benefit from better infrastructure and basic services, particularly healthcare.

Chad ranks 62nd of 79 developing countries, with its overall performance having deteriorated over the last five years from an already low base. It outperforms other developing countries in one area – carbon intensity of GDP – but severely lags behind in many others, including GDP per capita and the dependency ratio. Healthy-life expectancy, at 46.1 years, is lower than all countries bar Sierra Leone, and 65% of the population lives below the poverty line – though this represents a reduction of almost 20 percentage points over the last five years. The Framework indicates that only half the population has access to drinking water and 12% to sanitation. Education is far from delivering needed benefits: on average, pupils attain only 1.5 years of low-quality schooling, and lack the skills for even basic economic activities. Infrastructure and basic services remain rudimentary. Yet it is not only in the investment-heavy areas where Chad is holding back the inclusiveness of its growth process. With regard to legislation, it is harder to start a business in Chad than almost anywhere, massively constraining business and job growth, and resulting in a large informal economy. The rate of vulnerable employment is among the highest in the world.

Kenya ranks 65th on the IDI, with its performance declining somewhat over 4% in the last five years. Kenya has comparatively low labor productivity and GDP per capita, as well as a high dependency ratio. Wealth inequality has worsened considerably over the years. On the other hand, it has a larger middle class than most countries in this group. The Framework indicates that businesses have relatively good access to bank and equity finance, and the quality of the education system is reasonably good, though it needs to reach more students and generate more equitable outcomes to tackle high unemployment (9.2%) and shrink the informal sector. Access to basic services and infrastructure also needs to be developed: 43% of Kenya’s population uses the Internet, but only 23% have access to electricity, 30% to sanitation, and 63% to drinking water. Other priorities include reducing red tape and tackling rampant corruption.

Nepal ranks 27th on the IDI, showing remarkable improvement over the last five years. Notably, its poverty rate has declined by 25 percentage points in this time, and its income inequality (net income Gini) by almost 8 points. It outperforms all others on the intergenerational equity pillar during the most recent year, and has relatively low unemployment, including youth unemployment, and strong female participation in the workforce. However, it does poorly on GDP per capita and labor productivity. The Framework indicates that the informal sector remains large and wages low, leaving many workers in poverty. Priority areas include tackling corruption and administrative barriers to starting and growing a business, as well as continuing to improve infrastructure and basic services including education – particularly the availability and quality of vocational training.

Rwanda has seen a decline in its performance over the last five years, ranking 68th among the 79 developing countries on the IDI. Its scores on GDP per capita, labor productivity, net income and wealth Ginis, poverty rate, and median living standards are low. On the other hand, Rwanda does well in other areas: the employment rate is 85%, second only to Tanzania among developing countries; it has a high female labor force participation rate and good social mobility. The Framework shows that among low-income countries, Rwanda benefits from excellent business and political ethics (ranked 1st), having taken effective measures to combat corruption and bribery. Businesses also have relatively good access to finance. In order to make the economy more inclusive, Rwanda must continue to invest in infrastructure improvements and upgrade the education system to nsure not only access but also quality teaching and equity of outcomes.

Tanzania ranks 51st among the 79 developing countries on the IDI. It has low GDP per capita, low labor productivity, and low median living standards, with much of the population still below poverty level. Healthy-life expectancy is only 54.2 years and the country has a high dependency ratio. However, inequality in net income and wealth is relatively low. The Framework indicates that in its income group, Tanzania outperforms all other countries in asset-building and entrepreneurship. Its unemployment rate is relatively low, and the rate of female participation in the workforce is high while the gender pay gap is narrow. However, corruption and access to finance remain problematic for business development, and many workers are subsisting in vulnerable employment. Access to education is expanding, but quality needs to be improved as differences in performance outcomes persist across income groups, particularly in secondary school. Other priority areas for Tanzania include upgrading infrastructure and basic services.

Zimbabwe ranks 61st among developing countries on the IDI, faring poorly on indicators including GDP per capita, labor productivity, and healthy-life expectancy. The country boasts a high employment rate but will need to create many new jobs for a growing youth bulge. The dependency ratio is striking at 80.4 youth and elderly per 100 workers. The Framework shows that its strengths include a narrow gender gap in education and health, and a nominally progressive tax code. However, use of tax revenues is compromised by corruption, with poor corporate and government ethics and a high concentration of rents accruing to a small elite. The country’s net-income Gini is among the world’s highest. Zimbabwe does a decent job of getting children into primary school, but secondary and tertiary rates lag behind those of many low-income economies, and the quality of the overall education system is in great need of improvement. Many workers remain entrenched in poverty, and businesses face bureaucratic barriers in accessing finance and getting business done more generally. Much is needed in Zimbabwe to enable a more inclusive growth and development process.